Life assurance - worth extending beyond mortgage?

eur0

I'm just about to take out term assurance to (primarily) cover a new mortage (25 years). Having played with the figures I was thinking of extending the duration to beyond the mortgage term and on until the maximum age allowable (for this policy) which is 80 years. My thinking was that it would provide me with some flexibility for the future and of course would be much cheaper than extending once the mortgage term has finished. Does anyone have any thoughts? Is this common practice?

dunstonh

Is this common practice?

No. It is not an efficient way of doing thing.

Met_Bobby

dunstonh wrote: »

No. It is not an efficient way of doing thing.

Why not? Just curious. If it was a decreasing term policy I could see why not. Level Term assurence to age 80 (particularly index linked) would be okay wouldn't it? Sum assured enough to cover mortgage and a bit more for the family sounds okay. Or is that inefficient?

Wutang_2

upping the amount makes sense but why the term?

dunstonh

Met_Bobby wrote: »

Why not? Just curious. If it was a decreasing term policy I could see why not. Level Term assurence to age 80 (particularly index linked) would be okay wouldn't it? Sum assured enough to cover mortgage and a bit more for the family sounds okay. Or is that inefficient?

Your mortgage needs and family protection needs are two different things. Trying to lump them in together is no efficient as you either end up not having enough for some period and then too much for another. You may also run into IHT issues which could be avoided by having the protection split and utilsing trusts or putting the life assurance owner different to the life assured.

And, if you have a whole of life need, then you should pick a whole of life plan and not take a gamble on passing away before 75-80. If you dont have a whole of life need then there is no point paying for it (although there is some potential that suggests a whole of life assurance could actually work out to be a good investment for some people, where there are beneficiaries).

eur0

I only need it for the mortgage. It just seems good value to extend it for a much longer time. After all it is easy to stop it if I need to.

Met_Bobby

eur0 wrote: »

I only need it for the mortgage. It just seems good value to extend it for a much longer time. After all it is easy to stop it if I need to.

I still don't see why not.

IHT? Trusts? Whole of life? Hmmm! - Smokescreen?

dunstonh

IHT? Trusts? Whole of life? Hmmm! - Smokescreen?

Its hardly a smokescreen when you are trying to get someone to do it correclty. Questionning those comments suggests you dont know the consequences of getting it wrong. They may or may not be applicable but they are considerations at any time but even more so if you plan to go on with the protection that long into retirement. Still, if you want to fudge it then go ahead.

I only need it for the mortgage. It just seems good value to extend it for a much longer time. After all it is easy to stop it if I need to.

By extending the term your monthly payments will be higher from the outset. Unless you buy a yearly renewable term assurance. So, paying for something you dont need is a waste of money.

Met_Bobby

So then, don't ask a fiinancial adviser to explain their comments. They can get a bit shirty.

dunstonh

So then, don't ask a fiinancial adviser to explain their comments. They can get a bit shirty.

Didnt see anyone asking for an explanation.

Just an silly response from you disregarding potential issues and making them seem irrelevent. Back in 2007 it was reported that almost £1billion was paid on IHT that didnt need to be because trusts were not used with life assurance. £1 billion is quite a smokescreen.

Met_Bobby

dunstonh wrote: »

Didnt see anyone asking for an explanation.

I did. I thought that it was a perfectly reasonable suggestion but your answer was 'No, it is not efficient'. I asked for your reasoning behind this as I was interested.

[/quote]Back in 2007 it was reported that almost £1billion was paid on IHT that didnt need to be because trusts were not used with life assurance. £1 billion is quite a smokescreen.[/quote]

Were trusts the only way to avoid this? I don't think so do you?

I understand that you were trying to suggest that speaking to a financial adviser would be a good idea but a bald statement that it is 'not efficient' didn't really help. I was hoping that you would explain why it is not efficient. If it would take too much time to explain then that is okay to say.